Inheritance With Zero Income, Zero Expenses

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
LaughingSam
Posts: 6
Joined: Fri Apr 19, 2019 11:15 pm

Inheritance With Zero Income, Zero Expenses

Post by LaughingSam » Fri Apr 19, 2019 11:57 pm

Hello, I'm new to the forum and I have a very limited understanding of investing but I need some quick advice before I make any decisions with my money. This might be a unique situation but basically I've been living with my elderly parents for a while and acting as their full time caretaker. I haven't been able to work because of this and a physical injury. They've both been in failing health so I've been using their money and car and whatnot when needed (with their blessing of course). Because of that, I have no expenses, no insurance, and no IRA or 401k options.

Sadly, my father passed away last month and left my sibling and I an inheritance of around $100,000. I live in a state where there is no Inheritance Tax. I've always wanted to invest but have never had any money to do so. I'd like to put half of the inheritance into an Online Savings Account and start filling up 10 or 20 small CD's into a Ladder. Then I'd like to buy mutual funds with the rest because I have limited knowledge of how the stock market works and I was told that mutual funds are the safest option.

I've read a lot about how to pick funds based on whether they will be in a taxable account or a tax-deferred account, but I'm having a hard time finding what to do if it's neither? From what I can understand, I wouldn't have to pay tax until I reach $12,000 in income. Which types of funds would make the most sense for me now? Most of the profit would go back to the family fund so I'd like to help out as much as I can while my mother is still around to enjoy it. Any help would be greatly appreciated!

ExitStageLeft
Posts: 1781
Joined: Sat Jan 20, 2018 4:02 pm

Re: Inheritance With Zero Income, Zero Expenses

Post by ExitStageLeft » Sat Apr 20, 2019 9:46 am

Welcome to the forum. I'm sorry to hear of your loss.

It's good to develop a plan for investing the inheritance. Until you have a plan you are ready to implement, it would be wise to put it all in a high-yield savings account or a money market account.

The Bogleheads wiki has a page on managing a windfall at https://www.bogleheads.org/wiki/Managing_a_windfall

There's lots of useful advice there, but the primary one is to not rush yourself. Take your time to consider your needs and options. The forum members here are always available to answer any questions you have while developing this plan.

The type of brokerage account you need is in fact a taxable account. The earnings in the account are subject to taxation, but as long as your income remains low enough the actual tax will be zero. That can give you a little flexibility compared to someone in the 35% tax bracket, but you'll still want to keep the assets in the account as tax-efficient as you can so that you can grow your assets and keep taxes to a minimum.

niceguy7376
Posts: 2514
Joined: Wed Jul 10, 2013 2:59 pm
Location: Metro ATL

Re: Inheritance With Zero Income, Zero Expenses

Post by niceguy7376 » Sat Apr 20, 2019 9:50 am

Welcome to the forum and sorry for the loss of your Dad.

What is your age?
What is your plan for future in terms of income and living?

100K is inheritance share of yours or split with another person?

User avatar
RickBoglehead
Posts: 5581
Joined: Wed Feb 14, 2018 9:10 am
Location: In a house

Re: Inheritance With Zero Income, Zero Expenses

Post by RickBoglehead » Sat Apr 20, 2019 9:52 am

OP what do you utilize for medical insurance?
Avid user of forums on variety of interests-financial, home brewing, F-150, PHEV, home repair, etc. Enjoy learning & passing on knowledge. It's PRINCIPAL, not PRINCIPLE. I ADVISE you to seek ADVICE.

User avatar
Sandtrap
Posts: 8627
Joined: Sat Nov 26, 2016 6:32 pm
Location: Hawaii No Ka Oi , N. Arizona

Re: Inheritance With Zero Income, Zero Expenses

Post by Sandtrap » Sat Apr 20, 2019 9:58 am

What are your plans for when you other parent passes away?
Move?
Sell home (would you get the proceeds, all, half, etc)?
As you say "injury", do you have "disability" benefits, etc?
When your other parent passes away, are you then at zero income and zero support?
Are you able to work or is some kind of "assistance" possible in the future (after parent passes away) to support your living expenses which include dwelling, dwelling expenses, dwelling insurance, food-clothing-life expenses, etc?
How do you pay for your current medical expenses (insurance?)
What would your medical insurance coverage be if your last parent passes away? (how would those premiums and expenses be paid?)
Etc.
Etc.
Etc.

These may seem like just a few "hard questions" but all are very relevant for how you plan to save and "invest" this 100k windfall and more importantly, how you plan your financial future.

You do not need nor should you take and act on: "quick advice".
What you need is to stop, slow down, get wise personal life and financial advice, and then. . . proceed very carefully and slowly.

Condolences for your loss.
Take a moment.
Breath.
j
Wiki Bogleheads Wiki: Everything You Need to Know

mhalley
Posts: 7762
Joined: Tue Nov 20, 2007 6:02 am

Re: Inheritance With Zero Income, Zero Expenses

Post by mhalley » Sat Apr 20, 2019 10:29 am

At your tax level any of the funds from the three fund portfolio would be fine in the taxable account. You don’t mention what your second inheritance might be, or whether you need to keep your income at a certain point due to aca or Medicaid.
If you are just getting started with investing, start with these pages from the wiki

https://www.bogleheads.org/wiki/Getting_started
https://www.bogleheads.org/wiki/Three-fund_portfolio
https://www.bogleheads.org/wiki/Three-fund_portfolio
https://www.bogleheads.org/wiki/Investm ... _statement
The goal of the 50 k left over after the cd ladder and cash would determine what the aa should be.

Topic Author
LaughingSam
Posts: 6
Joined: Fri Apr 19, 2019 11:15 pm

Re: Inheritance With Zero Income, Zero Expenses

Post by LaughingSam » Sat Apr 20, 2019 2:31 pm

niceguy7376 wrote:
Sat Apr 20, 2019 9:50 am
What is your age?
What is your plan for future in terms of income and living?
100K is inheritance share of yours or split with another person?
I'm 42, unmarried, with no children. I figure that I have maybe 3 years with my mother if I'm lucky then probably move out of state and look for work. The amount of inheritance isn't official yet, but it appears to be between $75,000 and $125,000. I'm going to meet with an attorney next week to find out more, which is why I was asking for advice now. I wanted to have a plan going in before I signed anything. My father also owned a small amount of stock in Philip Morris but my attorney said I should sell it and take the money.

RickBoglehead wrote:
Sat Apr 20, 2019 9:52 am
OP what do you utilize for medical insurance?
My medical insurance is "Suck it up and live with it". I'm partially joking of course but I haven't had any medial expenses lately so that's why I'm going to leave a portion of it in an Online Savings account for emergencies. I have some minor things like a slipped disk, stomach ulcer, worsening eyesight... but those things can wait. The health of my mother is my number one priority right now, she doesn't want to be put in a nursing home so I'm trying to make things as comfortable as I can.

ExitStageLeft wrote:
Sat Apr 20, 2019 9:46 am
Until you have a plan you are ready to implement, it would be wise to put it all in a high-yield savings account or a money market account.
My plan is to keep the bulk of the money in an Online Savings accounts. I'm not sure yet if it's better to make the account a joint or individual account. I'm more reliable when it comes to money than my brother, but he's more selfish and has no interest in investing in stocks, so it will be a tough sell to talk him into letting me manage all of the inheritance. I wouldn't put any restrictions on him whatsoever, all of what's made from the investments would be his as well. But that's also why I want to make sure I'm making the right decisions. If the money were all mine, I'd take more risks with it. What's the consensus here on inheritance? Split at first then separately invest or invest then split the dividends?

ExitStageLeft wrote:
Sat Apr 20, 2019 9:46 am
You'll still want to keep the assets in the account as tax-efficient as you can so that you can grow your assets and keep taxes to a minimum.
Would swapping out less tax-efficient mutual funds after a year or two with much lower yielding ones also work? The idea for me was to use the money in the Online CD's for long term use (5 to 10 years from now) and use the investments for short term income and so that I could have some fun with it. The idea of putting it into stocks has always been an interest of mine, but figuring out the market and constantly monitoring it sounds too complex so mutual funds give me a way to still pick what I like but have someone manage it for me. Even ETF's seem like they are out my league at this point.

Thank you for the much needed help so far. I've been very overwhelmed over the past month so I haven't had the time to research all of this on my own.

User avatar
RickBoglehead
Posts: 5581
Joined: Wed Feb 14, 2018 9:10 am
Location: In a house

Re: Inheritance With Zero Income, Zero Expenses

Post by RickBoglehead » Sat Apr 20, 2019 2:49 pm

Inherited funds are either left directly via beneficiary designation to an heir or administered by an executor to the heirs. You wouldn't have a joint account with another heir. How were the assets left to you?
Avid user of forums on variety of interests-financial, home brewing, F-150, PHEV, home repair, etc. Enjoy learning & passing on knowledge. It's PRINCIPAL, not PRINCIPLE. I ADVISE you to seek ADVICE.

Lee_WSP
Posts: 1350
Joined: Fri Apr 19, 2019 5:15 pm
Location: Arizona

Re: Inheritance With Zero Income, Zero Expenses

Post by Lee_WSP » Sat Apr 20, 2019 2:53 pm

Sorry to hear that.

First you need to figure out what you want to do with it and what your risk tolerance is. Until then a high yield fdic account is fine. Take care of yourself first and don't worry about fomo.

User avatar
Wiggums
Posts: 2358
Joined: Thu Jan 31, 2019 8:02 am

Re: Inheritance With Zero Income, Zero Expenses

Post by Wiggums » Sat Apr 20, 2019 2:55 pm

LaughingSam wrote:
Sat Apr 20, 2019 2:31 pm
ExitStageLeft wrote:
Sat Apr 20, 2019 9:46 am
You'll still want to keep the assets in the account as tax-efficient as you can so that you can grow your assets and keep taxes to a minimum.
Would swapping out less tax-efficient mutual funds after a year or two with much lower yielding ones also work? The idea for me was to use the money in the Online CD's for long term use (5 to 10 years from now) and use the investments for short term income and so that I could have some fun with it. The idea of putting it into stocks has always been an interest of mine, but figuring out the market and constantly monitoring it sounds too complex so mutual funds give me a way to still pick what I like but have someone manage it for me. Even ETF's seem like they are out my league at this point.
“and use the investments for short term income and so that I could have some fun with it. ”

Are you talking about using the investment dividends to live on?

Your mutual funds would be long term investments and your CDs are short term.

User avatar
BL
Posts: 9221
Joined: Sun Mar 01, 2009 2:28 pm

Re: Inheritance With Zero Income, Zero Expenses

Post by BL » Sat Apr 20, 2019 3:26 pm

Sorry for the loss of your Dad, and thank you for looking after your parents. It can be difficult.

Here is some quick reading on investing and other things in personal finance.
https://www.etf.com/docs/IfYouCan.pdf
It suggests three mutual funds and to watch out for others who are not out to help you even if they talk like they are.

Another fine solution could be Vanguard's Target Date Fund, with date close to now, or a Life Strategy Moderate or conservative. I don't think you are going to generate much "fun money" by investing. You should not be gambling this precious inheritance and anything that promises big money would be of great risk.

I assume you would split the money with your brother and each do his own thing afterwards. If you father had no will, then the state has rules on inheritance. Perhaps the account was already in your names; still it would be best to divide it up unless there are certain circumstances we don't know. Do what is legal.
Your lawyer should know.

I would split up the money from selling Phillip Morris and buy either the single Target date fund or Total Stock Market (or even S&P 500 index fund if you much prefer as it performs close to total stock.) Target date funds at Vanguard only have a $1000 minimum, but other funds are mostly $3000 minimum to start a fund. Much smaller amounts can be added later. They do have ETF versions which can be bought in smaller amounts but only whole shares.

Vanguard's Prime Money Market gives a 2.45% yield at the moment; I consider it safe but it is not FDIC guaranteed like you could get at online Ally bank, for instance, where you could get similar rates. We usually suggest cash-like things like MM or CDs for the somewhat nearer term and stock market investments for more distant needs. Remember you can gain or lose money in the stock market and you don't want to risk too much until you have regular income coming in.

Have you checked into subsidized health insurance in your state, and also Medicaid? You want to have some kind of plan in place when the unexpected happens, so it is best to find out now.

In the Wiki Taylor has a lot of quotes from various investing books. You might find a book of great interest. Then pick up the book it came from at the library.

Thesaints
Posts: 2921
Joined: Tue Jun 20, 2017 12:25 am

Re: Inheritance With Zero Income, Zero Expenses

Post by Thesaints » Sat Apr 20, 2019 3:29 pm

Are the 100k bequeathed to you alone, or do you have to share with your siblings ?

Topic Author
LaughingSam
Posts: 6
Joined: Fri Apr 19, 2019 11:15 pm

Re: Inheritance With Zero Income, Zero Expenses

Post by LaughingSam » Sat Apr 20, 2019 10:14 pm

RickBoglehead wrote:
Sat Apr 20, 2019 2:49 pm
Inherited funds are either left directly via beneficiary designation to an heir or administered by an executor to the heirs. You wouldn't have a joint account with another heir. How were the assets left to you?
Yes, sorry I forgot to mention that. There was a will and I am the executor. The will states for everything to be left to my brother and I so on paper I'm the one in charge of deciding how to split it up. But in reality that's not always how it turns out. I want it pooled into a joint online account then taken from there to invest and make mini-CD's out of (twenty $1,000 CD's for example). He wants it split to most likely spend it over the next five years. This is why I want to make the most of this windfall while I have the chance, to cover what he loses. I'd like to not have to touch the original investment and just live off of the gains for a while if that's at all possible, but splitting the money probably won't allow that. Since I won't have to pay taxes for the first few years at least and I have no other expenses, I wanted to know what my other options were.

BL wrote:
Sat Apr 20, 2019 3:26 pm
Here is some quick reading on investing and other things in personal finance.
https://www.etf.com/docs/IfYouCan.pdf

Another fine solution could be Vanguard's Target Date Fund, with date close to now, or a Life Strategy Moderate or conservative.
Lots of great info here BL, thank you. That booklet pretty much goes along with what everyone is saying, stick with the conservative long-term funds. I was already planning that anyway, my main question that I'm still having a hard time understanding is what would be so bad about trying to flip the normal procedure and make the CD's long term (with option of nearly penalty free withdrawl thanks to Laddering) and try to make the mutual funds my short term income by buying into the highest gaining funds at first then swapping them out for more conservative ones say after 2 years? I'd like to give an example, just remember I have limited understanding of this so feel free to tell me how huge of a mistake it would be.

Let's say I put $10,000 into each of these:
Fidelity Select Communication Services Portfolio (FBMPX)
Fidelity Telecom and Utilities Fund (FIUIX)
Fidelity Select Software and IT Services Portfolio (FSCSX)
Fidelity Select Pharmaceuticals Portfolio (FPHAX)
Fidelity Select Health Care Portfolio (FSPHX)

I used Fidelity for the example but I'm not opposed to Vanguard funds if I can find an equivalent. What would be the best case/worst case scenario if I did this?

lakpr
Posts: 3406
Joined: Fri Mar 18, 2011 9:59 am

Re: Inheritance With Zero Income, Zero Expenses

Post by lakpr » Sat Apr 20, 2019 10:25 pm

Firstly, as an executor, you can’t make any decisions on investments about the money your sibling inherits. That is his/her money, you will be violating your executor privilege if you don’t distribute the money according to the terms of the will. If the will is silent about how the funds are to be disbursed, by default the assets should be liquidated ASAP and distributed to individual heirs. The executor can get compensated from the estate funds for his efforts first, but that’s about the only discretion that the executor has.

Do not expose yourself to law suits from your sibling.

Secondly, regarding your example: at Bogleheads we never advocate investing in individual slivers if the market. We buy instead the whole market.

Accordingly, our recommendation would be FSKAX (Fidelity Totsl Stock Market fund). The Bond fund will be FXNAX (Fidelity Total Bond Market Index). I would suggest a 50:50 split between these two funds since you said you are dependent on the yields of these investments for living expenses.

If you instead choose Vanguard, I would recommend the Wellesley fund (VWINX), otherwise a split 50:50 between VTSAX and VBTLX

User avatar
RickBoglehead
Posts: 5581
Joined: Wed Feb 14, 2018 9:10 am
Location: In a house

Re: Inheritance With Zero Income, Zero Expenses

Post by RickBoglehead » Sat Apr 20, 2019 10:30 pm

Right. Give him his share ASAP. Cost basis adjusts to date of death.
Avid user of forums on variety of interests-financial, home brewing, F-150, PHEV, home repair, etc. Enjoy learning & passing on knowledge. It's PRINCIPAL, not PRINCIPLE. I ADVISE you to seek ADVICE.

Lee_WSP
Posts: 1350
Joined: Fri Apr 19, 2019 5:15 pm
Location: Arizona

Re: Inheritance With Zero Income, Zero Expenses

Post by Lee_WSP » Sun Apr 21, 2019 1:04 am

I strongly suggest you decline to be the executor if feasible. This could ruin your relationship with your brother and potentially open yourself up to liability. Let someone else be the punching bag.

Thesaints
Posts: 2921
Joined: Tue Jun 20, 2017 12:25 am

Re: Inheritance With Zero Income, Zero Expenses

Post by Thesaints » Sun Apr 21, 2019 2:53 am

LaughingSam wrote:
Sat Apr 20, 2019 10:14 pm
Yes, sorry I forgot to mention that. There was a will and I am the executor. The will states for everything to be left to my brother and I so on paper I'm the one in charge of deciding how to split it up.
So, you don’t get anything ?? Why do you care how the money is invested, then ?

Topic Author
LaughingSam
Posts: 6
Joined: Fri Apr 19, 2019 11:15 pm

Re: Inheritance With Zero Income, Zero Expenses

Post by LaughingSam » Sun Apr 21, 2019 3:03 am

lakpr wrote:
Sat Apr 20, 2019 10:25 pm
Our recommendation would be FSKAX (Fidelity Totsl Stock Market fund). The Bond fund will be FXNAX (Fidelity Total Bond Market Index). I would suggest a 50:50 split between these two funds since you said you are dependent on the yields of these investments for living expenses.
If you instead choose Vanguard, I would recommend the Wellesley fund (VWINX), otherwise a split 50:50 between VTSAX and VBTLX
Interestingly, FSKAX/FZROX and FXNAX were my picks for long term as well. I was also going to add FTIHX and VOHIX. I read that if I choose a real estate fund from my state, I would be exempt from paying taxes on it for a while. Is this correct?

The Wellesley Fund looks very intriguing as well. I looked at hundreds of funds over the past few weeks but that one slipped by somehow. I had a very similar fund bookmarked, American Funds Tax-Advantaged Growth and Income Portfolio Class F-1 (TAIFX). Can you explain how and why they differ? The most important thing I want is to learn why my thought process is wrong when picking these funds. The example in my previous post is a very extreme version of what I wanted to do for the first 2 or 3 years. Then switch them out for FSKAX, FXNAX, and FTIHX or a targeted fund.

lakpr wrote:
Sat Apr 20, 2019 10:25 pm
Firstly, as an executor, you can’t make any decisions on investments about the money your sibling inherits. That is his/her money, you will be violating your executor privilege if you don’t distribute the money according to the terms of the will. If the will is silent about how the funds are to be disbursed, by default the assets should be liquidated ASAP and distributed to individual heirs. The executor can get compensated from the estate funds for his efforts first, but that’s about the only discretion that the executor has.
Yes, of course. I wasn't insinuating that I was going to do anything behind anyone's back. It was more about me wanting some facts to back up my ideas of how to invest smartly when we sit down to discuss this with an attorney next week. I don't have the will with me, the attorney has it. So I don't remember the exact wording about whether it's a 50/50 split or not, but that sounds like the best way to approach.

Lee_WSP wrote:
Sun Apr 21, 2019 1:04 am
I strongly suggest you decline to be the executor if feasible. This could ruin your relationship with your brother and potentially open yourself up to liability. Let someone else be the punching bag.
If I decline executorship does my brother become the de facto executor? What if he also declines? Does any of this matter if it's a 50/50 split? Could you go into more detail as to why you suggested this?
Last edited by LaughingSam on Sun Apr 21, 2019 3:19 am, edited 1 time in total.

lotusflower
Posts: 265
Joined: Thu Oct 24, 2013 12:32 am

Re: Inheritance With Zero Income, Zero Expenses

Post by lotusflower » Sun Apr 21, 2019 3:06 am

Thesaints wrote:
Sun Apr 21, 2019 2:53 am
LaughingSam wrote:
Sat Apr 20, 2019 10:14 pm
Yes, sorry I forgot to mention that. There was a will and I am the executor. The will states for everything to be left to my brother and I so on paper I'm the one in charge of deciding how to split it up.
So, you don’t get anything ?? Why do you care how the money is invested, then ?
"to my brother and I"

3-20Characters
Posts: 696
Joined: Tue Jun 19, 2018 2:20 pm

Re: Inheritance With Zero Income, Zero Expenses

Post by 3-20Characters » Sun Apr 21, 2019 4:39 am

In my opinion, it’s ok to serve as executor if that’s what your father’s will calls for but split up the inheritance, give your brother his portion, and let him do what he wants with it—even if he wants to blow it all on booze and the track.

If I’m reading this right, you will have 50k for yourself after you split it up? I don’t see the point of all those CDs. Put it all in a online bank account like ally. Some CDs give you the best rate if you lock in a minimum of 25k, so I’d split it up to maximize interest. Another option is put it all in a money market at vanguard, Fidelity, etc.

Don’t put money in the market if you think you might need it within the next 5 years or so. You can use CDs, money market fund, a short term bond fund, or something similar. If you invest, keep it simple. Maybe a simple low fee S&P 500 or World market fund.

Good luck.

User avatar
Wiggums
Posts: 2358
Joined: Thu Jan 31, 2019 8:02 am

Re: Inheritance With Zero Income, Zero Expenses

Post by Wiggums » Sun Apr 21, 2019 5:53 am

3-20Characters wrote:
Sun Apr 21, 2019 4:39 am
In my opinion, it’s ok to serve as executor if that’s what your father’s will calls for but split up the inheritance, give your brother his portion, and let him do what he wants with it—even if he wants to blow it all on booze and the track.

If I’m reading this right, you will have 50k for yourself after you split it up? I don’t see the point of all those CDs. Put it all in a online bank account like ally. Some CDs give you the best rate if you lock in a minimum of 25k, so I’d split it up to maximize interest. Another option is put it all in a money market at vanguard, Fidelity, etc.

Don’t put money in the market if you think you might need it within the next 5 years or so. You can use CDs, money market fund, a short term bond fund, or something similar. If you invest, keep it simple. Maybe a simple low fee S&P 500 or World market fund.

Good luck.
I agree with this suggestion.

lakpr
Posts: 3406
Joined: Fri Mar 18, 2011 9:59 am

Re: Inheritance With Zero Income, Zero Expenses

Post by lakpr » Sun Apr 21, 2019 6:18 am

LaughingSam wrote:
Sun Apr 21, 2019 3:03 am
Interestingly, FSKAX/FZROX and FXNAX were my picks for long term as well. I was also going to add FTIHX and VOHIX. I read that if I choose a real estate fund from my state, I would be exempt from paying taxes on it for a while. Is this correct?

The Wellesley Fund looks very intriguing as well. I looked at hundreds of funds over the past few weeks but that one slipped by somehow. I had a very similar fund bookmarked, American Funds Tax-Advantaged Growth and Income Portfolio Class F-1 (TAIFX). Can you explain how and why they differ? The most important thing I want is to learn why my thought process is wrong when picking these funds. The example in my previous post is a very extreme version of what I wanted to do for the first 2 or 3 years. Then switch them out for FSKAX, FXNAX, and FTIHX or a targeted fund.
Wellesley fund is an actively managed fund, but has a glowing reputation on this forum for its consistently excellent returns over the past 4 to 5 decades.

American Funds usually have high expense ratios, front end loads, etc. Not recommended. With respect to the particular fund you mentioned, I will argue that you do not need it. It is meant for people in high tax brackets and looking for a place to park their funds without getting frequently hit with capital gains distributions and dividends. You don’t need a tax managed fund.

Yes, if you want to add international fund to your mix it is fine, but don’t go crazy, no more than 20% of your portfolio in such a fund. Not sure if you noticed, but the international funds have performed/lagged domestic funds by an annualized 4% over the past TWO DECADES. That is a long time, and even for the most patient folks such funds have been unrewarding for long. That said, hedge your bets just a bit.

Lastly, with a corpus of at most $60k for your share of the inheritance, I don’t think you need to chase twenty different funds. Just pick Wellesley, or a 2-fund/3-fund portfolio between stocks, bonds, international.

fru-gal
Posts: 1269
Joined: Wed Jan 02, 2019 9:48 pm
Location: New England

Re: Inheritance With Zero Income, Zero Expenses

Post by fru-gal » Sun Apr 21, 2019 6:43 am

LaughingSam wrote:
Sat Apr 20, 2019 10:14 pm
There was a will and I am the executor. The will states for everything to be left to my brother and I so on paper I'm the one in charge of deciding how to split it up. But in reality that's not always how it turns out. I want it pooled into a joint online account then taken from there to invest and make mini-CD's out of (twenty $1,000 CD's for example). He wants it split to most likely spend it over the next five years. This is why I want to make the most of this windfall while I have the chance, to cover what he loses. I'd like to not have to touch the original investment and just live off of the gains for a while if that's at all possible, but splitting the money probably won't allow that. Since I won't have to pay taxes for the first few years at least and I have no other expenses, I wanted to know what my other options were.
I haven't had a chance to read all the replies, but unless there's something unusual in the will, you get half and your brother gets half. You don't get to run his financial life, even if he's driving it over a cliff. You also don't have all the freedom you apparently think you have to decide how to split things up.

I'm surprised a probate court hasn't told you this, or your attorney if you have one. It sounds like you plan on abusing your responsibilities as an executor, leaving yourself open to a lawsuit.

Lee_WSP
Posts: 1350
Joined: Fri Apr 19, 2019 5:15 pm
Location: Arizona

Re: Inheritance With Zero Income, Zero Expenses

Post by Lee_WSP » Sun Apr 21, 2019 10:13 am

LaughingSam wrote:
Sun Apr 21, 2019 3:03 am

If I decline executorship does my brother become the de facto executor? What if he also declines? Does any of this matter if it's a 50/50 split? Could you go into more detail as to why you suggested this?
No. The document controls if there is a second executor in case the first cannot. Barring that, states usually say the court will appoint one or the beneficiaries can commonly choose one.

Either way, speak to an attorney about your best course of action even if it costs you a few hundred dollars.

trueblueky
Posts: 1646
Joined: Tue May 27, 2014 3:50 pm

Re: Inheritance With Zero Income, Zero Expenses

Post by trueblueky » Sun Apr 21, 2019 11:32 am

My father also owned a small amount of stock in Philip Morris but my attorney said I should sell it and take the money.
I agree with the attorney. You and brother inherit the stock with stepped-up, long-term basis. Unless it has gone up substantially since your father died, you will have little or no taxable capital gain. Even if you do, you appear to be in the 0% bracket. The only concern is if the stock is held at a brokerage that will charge you a lot to sell. In that case, transferring the stock to another brokerage and then selling might make the most sense.
My medical insurance is "Suck it up and live with it". I'm partially joking of course but I haven't had any medial expenses lately so that's why I'm going to leave a portion of it in an Online Savings account for emergencies. I have some minor things like a slipped disk, stomach ulcer, worsening eyesight... but those things can wait. The health of my mother is my number one priority right now, she doesn't want to be put in a nursing home so I'm trying to make things as comfortable as I can.
You should qualify for Medicaid. Please check before you need it.

averagedude
Posts: 821
Joined: Sun May 13, 2018 3:41 pm

Re: Inheritance With Zero Income, Zero Expenses

Post by averagedude » Sun Apr 21, 2019 11:51 am

You need health insurance. You are probably in a position where you will pay little or nothing at all for it. One medical emergency could wipe out all of your emergency savings and future inheritance. This could put you in a situation where you become destitute later in life.

Lee_WSP
Posts: 1350
Joined: Fri Apr 19, 2019 5:15 pm
Location: Arizona

Re: Inheritance With Zero Income, Zero Expenses

Post by Lee_WSP » Sun Apr 21, 2019 12:00 pm

If your state expanded Medicaid then you are leaving free health care on the table. If they did not you are unfortunately in that left behind group. I don't have great advice in that case.

momvesting
Posts: 104
Joined: Tue Apr 12, 2016 9:18 pm

Re: Inheritance With Zero Income, Zero Expenses

Post by momvesting » Sun Apr 21, 2019 12:42 pm

Do you have a college degree? If so, what degree? Would you consider using that money to get a degree or an advanced degree? With your mother's health, are you able to take classes, even part time or online? Check into degree programs and student health insurance. Sometimes investing in your education has better returns than anything you will find in the stock market. Good luck.

KyleAAA
Posts: 7730
Joined: Wed Jul 01, 2009 5:35 pm
Contact:

Re: Inheritance With Zero Income, Zero Expenses

Post by KyleAAA » Sun Apr 21, 2019 1:06 pm

After reading this entire thread I’m still not 100% sure what you are asking. Splitting the inheritance and investing any proceeds are completely separate And there’s no need to have an investment plan figured out before talking to the lawyer. So you have plenty of time to figure out how to invest. I suggest reading everything on the bogleheads wiki before doing anything. You absolutely should not under any circumstances invest any portion of your brother’s share, so you can safely ignore that piece.

As for your investment plan: why 20 CDs? What advantage would that have over 1 or 2 or 3 CDs? And why CDs for long term? CDs are very low returning investments. Stocks tend to return much more over the long term, but are very risky. Putting short term money in stocks means you could lose 50% of it in less than a year. Do not invest any money ins ticks you plan to spend in the next few years. Read this wiki and look st the three fund portfolio, which should be more than adequate for your needs. But first you need to figure out when you will need the money. Do not try to invest in a high gaining fund and then switch out later, you will almost certainly lose a lot of money doing that. Those funds could just as easily lose 40% as gain 10%.

Dottie57
Posts: 7477
Joined: Thu May 19, 2016 5:43 pm
Location: Earth Northern Hemisphere

Re: Inheritance With Zero Income, Zero Expenses

Post by Dottie57 » Sun Apr 21, 2019 1:44 pm

As stated above. Sell the stock. Follow all probate rules. Close the estate. Split the proceeds giving your brother his portion.

Don’t invest anything for your brother. He handles his portion. You handle yours.

Topic Author
LaughingSam
Posts: 6
Joined: Fri Apr 19, 2019 11:15 pm

Re: Inheritance With Zero Income, Zero Expenses

Post by LaughingSam » Sun Apr 21, 2019 2:40 pm

lakpr wrote:
Sun Apr 21, 2019 6:18 am
Lastly, with a corpus of at most $60k for your share of the inheritance, I don’t think you need to chase twenty different funds. Just pick Wellesley, or a 2-fund/3-fund portfolio between stocks, bonds, international.
I never stated that I was going to invest in twenty funds at once or even ten for that matter. I said I was planning on 3 Total Market Funds and maybe a small amount in a tax exempt Real Estate Fund if people here think it's a good idea. Or just a fund Like Wellesley or Target-Date Fund. Maybe I would also take a risk on an Information Technology related fund because that's what I'm interested in most.

fru-gal wrote:
Sun Apr 21, 2019 6:43 am
I haven't had a chance to read all the replies, but unless there's something unusual in the will, you get half and your brother gets half. You don't get to run his financial life, even if he's driving it over a cliff. You also don't have all the freedom you apparently think you have to decide how to split things up.
I'm surprised a probate court hasn't told you this, or your attorney if you have one. It sounds like you plan on abusing your responsibilities as an executor, leaving yourself open to a lawsuit.
If you had read the replies, you would have noticed that my original train of thought was wrong and I have a better understanding of what I can and cannot decide now. I was never planning on forcing my brother to do anything with his share anyway, I'm still in the very early stages of figuring all of this out and haven't time to research it. I've also mentioned that I haven't gone to my attorney yet to discuss this, I've only dropped off all the papers. I'm sure he will explain all of this to me, but it's nice to have as much knowledge as possible before going in so I appreciate all the help so far.

So the updated plan is to split the inheritance up front and consider the other half a loss. Assuming it's around $50k, I will probably put $10k into an online bank MMA, $20k into CD's, and invest the other $20k in mututal funds. I know it's probably recommened to invest all $40k in funds, but I'm not ready to put all my eggs into one basket yet. At least not until I see how it turns out, I can always add to it later. I wanna make sure I'm crunching the numbers correctly, what would my net gain be after one year roughly? Should I use an external bank, or are there less hoops to jump through doing it all with Vanguard?

Lee_WSP
Posts: 1350
Joined: Fri Apr 19, 2019 5:15 pm
Location: Arizona

Re: Inheritance With Zero Income, Zero Expenses

Post by Lee_WSP » Sun Apr 21, 2019 3:52 pm

LaughingSam wrote:
Sun Apr 21, 2019 2:40 pm
So the updated plan is to split the inheritance up front and consider the other half a loss. Assuming it's around $50k, I will probably put $10k into an online bank MMA, $20k into CD's, and invest the other $20k in mututal funds. I know it's probably recommened to invest all $40k in funds, but I'm not ready to put all my eggs into one basket yet. At least not until I see how it turns out, I can always add to it later. I wanna make sure I'm crunching the numbers correctly, what would my net gain be after one year roughly? Should I use an external bank, or are there less hoops to jump through doing it all with Vanguard?
I'd suggest starting a new topic once you have a concrete idea of how much and what you want to do with it. Parking it in a high yield savings account in the meantime is not a bad course of action.

GrowthSeeker
Posts: 785
Joined: Tue May 15, 2018 10:14 pm

Re: Inheritance With Zero Income, Zero Expenses

Post by GrowthSeeker » Sun Apr 21, 2019 5:22 pm

1. The idea of having a joint account with your brother is very bizarre.
Unless the will specifies something to the contrary, the usual course of action would be to split the dollar value of the estate 50:50. You put your 50% into your own account, and your sibling does the same.
Then you do your thing and your brother does your his thing.

2. It seems the income being lived off of is your parent's Social Security plus (if any) pension, annuity etc. So, for a while (e.g. 3 years maybe), once the second parent passes away, before you find employment, you might need that 50k or 100k to live on. Any money that you need in the next 10 years (or maybe 5 years) shouldn't be in the stock market. Plus the income stream after the first parent dies is likely less than it was while both parents were living.

3. I can't imagine why you're not eligible for Medicaid for health insurance, possibly even income from welfare; possibly even income from the state as caregiver for your parents.

4. I'm still not clear whether the entire current inheritance is about 100k of which your share is 50k, or if your half is 100k. Either way, I'd initially put it all into a high interest savings account (e.g. Ally right now is 2.2%) or money market mutual fund (e.g. Vanguard's Prime, VMMXX, currently 2.45%) until read a lot more and figure out a plan. You can open an account initially with zero balance, and fund it later from the inheritance.
Just because you're paranoid doesn't mean they're NOT out to get you.

trueblueky
Posts: 1646
Joined: Tue May 27, 2014 3:50 pm

Re: Inheritance With Zero Income, Zero Expenses

Post by trueblueky » Sun Apr 21, 2019 7:46 pm

So the updated plan is to split the inheritance up front and consider the other half a loss.
Ahem. Split the inheritance up front and consider the other half your brother's.

ryman554
Posts: 1250
Joined: Sun Jan 12, 2014 9:44 pm

Re: Inheritance With Zero Income, Zero Expenses

Post by ryman554 » Mon Apr 22, 2019 8:28 am

LaughingSam wrote:
Sun Apr 21, 2019 2:40 pm

If you had read the replies, you would have noticed that my original train of thought was wrong and I have a better understanding of what I can and cannot decide now.

...

So the updated plan is to split the inheritance up front and consider the other half a loss.
You have not internalized it if you are considering your legally-required sibling's share "a loss".

To provide actually helpful advice, stick your share of the inheritance into a checking account. Given you have no assets or income, or ..... I posit that is it much more likely than not that you will need some or all of it to get you going once your caretaker responsibilities are up.

It is too soon to consider investment advice.

I agree with others to look into Medicaid possibilities.

Topic Author
LaughingSam
Posts: 6
Joined: Fri Apr 19, 2019 11:15 pm

Re: Inheritance With Zero Income, Zero Expenses

Post by LaughingSam » Wed Apr 24, 2019 3:26 pm

ryman554 wrote:
Mon Apr 22, 2019 8:28 am

To provide actually helpful advice, stick your share of the inheritance into a checking account. Given you have no assets or income, or ..... I posit that is it much more likely than not that you will need some or all of it to get you going once your caretaker responsibilities are up.

It is too soon to consider investment advice.

I agree with others to look into Medicaid possibilities.

Just to update... I've spoken with the attorney yesterday and started the probate process. We'll be splitting everything evenly and the process should take about nine months. I've applied for Medicaid and I'm waiting to hear back. I'm not eligible for any other state run programs in my area that I know of. By the end of the year I will know a lot more about my situation so everything is on hold until then, at which point I will decide how much money to invest and how much to keep parked in online savings. This topic can probably be closed.

I just want to say what an immense help this has been. I've gotten better and more constructive advice in three days on this forum than I had found in a month searching for advice online. It was much needed in a time of much anxiety and stress. :happy

Post Reply